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TEODULFO E. LAO v. LGU OF CAGAYAN DE ORO CITY

FACTS:

This case involves a Petition for Review on Certiorari filed by Barangay Captain Enrico D. Salcedo and several Cagayan De Oro City Councilors (petitioners) against the Regional Trial Court's denial of their prayer for a temporary restraining order and dismissal of their complaint for the declaration of nullity of a contract.

On March 19, 2007, the City Council of Cagayan De Oro passed City Ordinance No. 10557-2007, approving an unsolicited proposal for the redevelopment of Agora Complex into a modern integrated terminal, public market, and vegetable landing area. The project proponent was Mega Integrated Agro-Livestock Farm Corporation (Mega Farm) through its President Erwin Bryan See.

The redevelopment would be under a build-operate-transfer scheme. The City Council deferred consideration of the proposed Ordinance No. 2007-210, which authorized the mayor to enter into the contract.

On January 27, 2009, Mega Farm and the newly elected Mayor Constantino Jaraula executed the Build-Operate-Transfer Contract for the Redevelopment of Agora Complex (Agora Complex BOT Contract). The terms and conditions of this contract were allegedly different from those in the draft contract approved by the City Council's Resolution No. 8651-2007.

Petitioners, as public officers and in their personal capacity, filed a complaint for the declaration of nullity of the Agora Complex BOT Contract, alleging bad faith and fraudulent maneuvers between Mega Farm and the City Government of Cagayan De Oro. They also claimed that Mega Farm was unqualified and lacked the financial capacity to undertake the project. They prayed that the contract be declared null and void and sought damages and a temporary restraining order.

The City Government and public officials of Cagayan De Oro filed a motion to dismiss the complaint, arguing that the Regional Trial Court did not have jurisdiction over the issue and that petitioners did not pay the required docket fees.

The case involves a dispute over the Agora Complex BOT Contract in Cagayan De Oro City. The petitioners, who were elected city councilors, filed a complaint seeking to stop the implementation of the contract. They argued that the contract was unconstitutional and involved fraudulent maneuvers. They requested for the issuance of a temporary restraining order to halt the project. The respondents, who were the incumbent members of the City Council, filed a motion to dismiss, claiming that the petitioners had no cause of action. They also requested for a bill of particulars to specify the alleged damages.

The Regional Trial Court denied the temporary restraining order and dismissed the complaint, finding that the Agora Complex BOT Contract was a national government project and that the petitioners failed to prove that the exceptions under the law applied. The court ruled that the petitioners lacked standing as they were not parties to the contract and that the contract did not involve appropriation of public funds. The petitioners filed a motion for reconsideration, which was denied.

They then filed a Petition for Review on Certiorari before the Supreme Court, arguing that the Regional Trial Court still had jurisdiction over the declaration of nullity of the contract. They also alleged that the contract was unconstitutional and violated principles of free enterprise.

The case revolves around four main issues. First, whether or not the mode of appeal filed by Teodulfo E. Lao, Jr., Roger A. Abaday, Zaldy O. Ocon, and Enrico D. Salcedo is proper, as they filed a Petition for Review with the Court of Appeals instead of directly with the Supreme Court. Second, whether or not their Verification and Certification of Non-Forum Shopping is defective, which could warrant the dismissal of their appeal. Third, whether or not the Regional Trial Court correctly denied the issuance of a temporary restraining order against the Agora Complex Build-Operate-Transfer Contract. And finally, whether or not Teodulfo E. Lao, Jr., Roger A. Abaday, Zaldy O. Ocon, and Enrico D. Salcedo have the legal standing to file a complaint seeking the nullification of the said contract.

ISSUES:

  1. Whether or not it was proper for Teodulfo E. Lao, Jr., Roger A. Abaday, Zaldy O. Ocon, and Enrico D. Salcedo to file a Petition for Review under Rule 45 directly with the Supreme Court.

  2. Whether or not Teodulfo E. Lao, Jr., Roger A. Abaday, Zaldy O. Ocon, and Enrico D. Salcedo's Verification and Certification of Non­-Forum Shopping is fatally defective as to warrant the dismissal of the Petition for Review.

  3. Did the notary public violate the Notarial Rules and the Code of Professional Responsibility by failing to indicate in notarized documents that the affiants are personally known to them or have presented competent evidence of their identities?

  4. Should Atty. Tagarda be held administratively liable for failure to comply with the Notarial Rules and the Code of Professional Responsibility?

  5. Whether or not the preliminary injunction issued by the RTC is void due to its violation of Republic Act No. 8975.

  6. Whether or not the Court of Appeals committed grave abuse of discretion in lifting the preliminary injunction issued by the RTC.

  7. Whether the members of the City Council have the legal standing to file a case questioning a contract entered into by the city mayor without authority.

  8. Whether the March 30, 2009 Resolution and May 11, 2009 Order of the Regional Trial Court should be reversed.

  9. Whether a Temporary Restraining Order and/or Writ of Preliminary Prohibitory Injunction should be issued.

RULING:

  1. The Supreme Court ruled that it was not proper for Teodulfo E. Lao, Jr., Roger A. Abaday, Zaldy O. Ocon, and Enrico D. Salcedo to file a Petition for Review under Rule 45 directly with the Supreme Court. Questions of fact are raised in their petition, which are not cognizable in a Rule 45 petition for review. Therefore, their petition should have been filed with the Court of Appeals.

  2. The Supreme Court found that the Verification and Certification of Non-Forum Shopping in the petition was improperly notarized, lacking the required statement that the affiants were personally known to the notary public or that competent evidence of their identities was presented. Thus, it was ruled that the Verification and Certification of Non-Forum Shopping was fatally defective.

  3. Yes, the notary public violated the Notarial Rules and the Code of Professional Responsibility by failing to indicate in notarized documents that the affiants are personally known to them or have presented competent evidence of their identities.

  4. Atty. Tagarda should show cause why he should not be made administratively liable for failure to comply with the Notarial Rules and the Code of Professional Responsibility.

  5. The preliminary injunction issued by the RTC restraining the opening of sealed bids for a Build-Operate-Transfer project of the City of Cagayan de Oro is void and of no force and effect as it is in violation of Republic Act No. 8975. The said law prohibits the issuance of preliminary injunctions by any court, other than the Supreme Court, to restrain the bidding or awarding of a national government project covered by the law.

  6. The Court of Appeals did not commit grave abuse of discretion in lifting the preliminary injunction issued by the RTC. By lifting the injunction, it allowed the implementation of the infrastructure project to continue without any undue and costly delay, as expressly mandated by Republic Act No. 8975.

  7. Yes, the members of the City Council have the legal standing to file a case questioning a contract entered into by the city mayor without authority. The real party in interest in such a case is the city itself, as it is the local government unit that stands to be injured or benefited by any judgment. The city councilors represent the city in the suit and have the authority, interest, and duty to file cases on behalf of the city to restrain the execution of contracts entered into in violation of the Local Government Code.

  8. The March 30, 2009 Resolution and May 11, 2009 Order of the Regional Trial Court are reversed.

  9. The denial of the issuance of a Temporary Restraining Order and/or Writ of Preliminary Prohibitory Injunction is affirmed.

PRINCIPLES:

  • Direct resort to the Supreme Court by way of petition for review on certiorari is permitted when only questions of law are involved.

  • Questions of law do not require the determination of the truth or falsehood of facts or the examination of evidence.

  • Questions of fact are matters of evidence that pertain to the trial courts as the trier of facts and the appellate courts as the reviewer of facts.

  • The Verification and Certification of Non-Forum Shopping must be properly notarized in accordance with the 2004 Rules on Notarial Practice. It should contain a statement that the affiants were personally known to the notary public or that competent evidence of their identities was presented.

  • Notaries public must observe "the highest degree of care" in ensuring compliance with the basic requirements of the Notarial Rules.

  • Notaries public who fail to indicate in notarized documents that the affiants are personally known to them or have presented competent evidence of their identities violate not only the Notarial Rules, but also Canon 1, Rule 1.01 of the Code of Professional Responsibility.

  • A notary public should not notarize a document unless the person who signed the same is the very person who executed and personally appeared before him to attest to the contents and the truth of what are stated therein.

  • A notarized document is entitled to full faith and credit upon its face, and a notary public must observe with utmost care the basic requirements in the performance of his duties to maintain public confidence in the integrity of notarized documents.

  • Trial courts retain jurisdiction over the main cause of action to nullify or implement a national government contract despite the provisions of Republic Act No. 8975, which prohibits the issuance of temporary restraining orders, preliminary injunctions, or preliminary mandatory injunctions against national government projects.

  • The prohibition in Republic Act No. 8975 applies to cases involving national government projects, including those covered by the Build-Operate-Transfer Law.

  • Republic Act No. 8975 prohibits the issuance of preliminary injunctions by any court, other than the Supreme Court, to restrain the bidding or awarding of a national government project covered by the law.

  • The party seeking a writ of preliminary injunction must discharge the burden of proving a clear and compelling breach of a constitutional provision.

  • To be entitled to a writ of preliminary injunction, the private respondent needs to show that it has the ostensible right to the final relief prayed for in its complaint.

  • The real party in interest, who may file a case questioning the validity of a contract entered into by the city mayor, is the city itself, as it is the local government unit that stands to be injured or benefited by any judgment. The representatives of the city, such as the city councilors, may file cases on behalf of the city.

  • The authority of the city mayor to enter into contracts on behalf of the city must emanate from the City Council. The City Council is the source of the mayor's power to execute contracts for the city, and its members have the authority, interest, and duty to file cases on behalf of the city to question the basis of the mayor's authority.

  • The 2004 Rules of Notarial Practice

  • The Code of Professional Responsibility

  • The power of the Supreme Court to reverse decisions of lower courts

  • The requirements for the issuance of a Temporary Restraining Order and/or Writ of Preliminary Prohibitory Injunction